COMPX INTERNATIONAL INC.
VARIABLE COMPENSATION PLAN
ARTICLE I.
GENERAL
SECTION 1.1. PURPOSE OF THE PLAN. The purpose of the Plan is to attract
and retain high quality executives, officers and employees and provide further
incentives to such executives and employees to maximize the Company's annual
financial performance and thereby increase stockholder value.
SECTION 1.2. DEFINITIONS. Whenever used in this Plan, the following terms
shall have the meanings set forth below unless otherwise expressly provided.
(A) "ANNUAL OPERATING PLAN" shall have the meaning given such term in
SECTION 4.3.
(B) "AWARD GROUP" means one or more groups the Committee or the
Company's management, as applicable, establish pursuant to the Plan and to
which the Committee or the Company's management, as applicable, may
delegate Participants from time to time.
(C) "BASE SALARY" means:
(I) with respect to Participants other than Certain Executive
Officers, the regular salary actually paid during a Plan Year to a
Participant while participating in the Plan, including any salary
reduction contributions made to the Company's 401(k) Plan or other
deferred compensation plans, but excluding any Variable Compensation
Awards under the Plan and any other bonuses, incentive pay or special
awards; and
(II) with respect to Certain Executive Officers, the Certain
Executive Officer's actual regular salary at the rate in effect prior
to the ninetieth (90th) day of the Plan Year and not after the date
the Company Performance Levels are established, including any salary
reduction contributions made to the Company's 401(k) Plan or other
deferred compensation plans, but excluding any Variable Compensation
Awards under the Plan and any other bonuses, incentive pay or special
awards.
(D) "BOARD" means the board of directors of CompX International Inc.
(E) "CERTAIN EXECUTIVE OFFICER" means for each Plan Year, each
Executive Officer on the ninetieth day of the Plan Year whose Base Salary
and Award Group would entitle the Executive Officer, upon the Company
achieving the Maximum Company Performance Level for such Award Group, to
receive a Variable Compensation Award that if the award did not qualify as
performance based compensation under the Code would prevent the Company
from fully deducting the compensation paid to such Executive Officer in
such Plan Year pursuant to section 162(m) of the Code.
(F) "CODE" means the Internal Revenue Code of 1986, as amended.
(G) "COMMITTEE" means the Management Development and Compensation
Committee of the Board or such other committee as may be designated from
time to time by the Board, which shall consist of two or more members who
meet the requirements of section 162(m) of the Code. The members of the
Committee shall be appointed by the Board, and any vacancy on the Committee
shall be filled by the Board.
(H) "COMPANY" means CompX International Inc. and its direct or
indirect subsidiaries.
(I) "COMPANY PERFORMANCE LEVEL" means with respect to each Award
Group the Minimum Company Performance Level, Target Company Performance
Level or Maximum Company Performance Level (each as described in
SECTION 4.3 below) achieved or to be achieved by the Company or applicable
Company business unit for the applicable Plan Year.
(J) "EMPLOYEE" means an employee of the Company.
(K) "EXECUTIVE OFFICER" shall mean an "executive officer" as set
forth in rule 3b-7 promulgated under the Securities Exchange Act of 1934.
(L) "401(K) PLAN" means an employee welfare plan of the Company
qualified under the provisions and regulations of section 401(k) of the
Code.
(M) "MAXIMUM COMPANY PERFORMANCE LEVEL" shall have the meaning given
such term in SECTION 4.3.
(N) "MINIMUM COMPANY PERFORMANCE LEVEL" shall have the meaning given
such term in SECTION 4.3.
(O) "PARTICIPANT" means an Employee, including an Executive Officer,
the Committee or the Company's management, as applicable, selects or
designates pursuant to the Plan for participation in the Plan for a
specified Plan Year.
(P) "PERFORMANCE PERCENTAGE" means with respect to an Award Group the
percentage the Committee assigns to the Award Group at each different
Company Performance Level for the Award Group.
(Q) "PLAN YEAR" means the Company's fiscal year.
(R) "TARGET COMPANY PERFORMANCE LEVEL" shall have the meaning given
such term in SECTION 4.3.
(S) "TOTAL AND PERMANENT DISABILITY" shall have the meaning given
such term in the retirement programs of the Company.
(T) "RETIREMENT" shall have the meaning given such term in the
retirement programs of the Company.
(U) "VARIABLE COMPENSATION AWARD" with respect to any Participant for
any Plan Year means an amount to be paid by the Company to such Participant
under the terms of the Plan equal to the product of (A) the applicable
Performance Percentage for such Participant for such Plan Year, times (B)
the Base Salary of such Participant for such Plan Year.
SECTION 1.3. GENDER AND NUMBER. Except when otherwise indicated by the
context, words in the masculine gender, when used in the Plan, shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
ARTICLE II.
ADMINISTRATION OF THE PLAN
SECTION 2.1. ADMINISTRATION.
(A) The Committee shall administer the Plan. Except with respect to
the Committee's administrative authority regarding Executive Officers, the
Committee may delegate its day-to-day administrative authority regarding
the Plan to the chief executive officer. The chief executive officer may
in turn re-delegate from time to time said administrative authority to such
officers and employees of the Company as he or she deems appropriate. The
Company's management shall assist and provide such recommendations to the
Committee as the Committee may request from time to time in connection with
the administration of the Plan.
(B) Subject to the limitations of the Plan, the Committee shall, in
addition to other powers and duties the Plan gives the Committee elsewhere
in the Plan: (i) designate and approve Performance Percentages applicable
in determining Variable Compensation Awards for payment to Participants in
such forms and amounts as it shall determine from time to time, (ii) impose
such limitations, restrictions and conditions upon such Variable
Compensation Awards as it shall deem appropriate, (iii) interpret the Plan
and adopt, amend and rescind administrative guidelines relating to the
Plan, (iv) correct any defects or omissions or reconcile any
inconsistencies in the Plan, the Performance Percentages or in any Variable
Compensation Award granted hereunder and (v) make all other necessary
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. The Committee's
determinations on matters within its authority shall be conclusive and
binding.
(C) All expenses associated with the Plan shall be borne by the
Company subject to such allocation to its subsidiaries and business units
as it deems appropriate.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
SECTION 3.1. ELIGIBILITY AND PARTICIPATION. Subject to the limitations of
the Plan, the Committee shall determine the Executive Officers to be selected as
Participants under the Plan and the Award Groups in which each such Executive
Officer shall be included. Except for Executive Officers, the Company's
management shall determine the Employees to be selected as Participants under
the Plan and the Award Group in which each such Participant shall be included.
Any Employee, except Certain Executive Officers, may be designated and selected
as a Participant in the Plan at any time during a Plan Year, including after the
ninetieth (90th) day of such Plan Year.
ARTICLE IV.
VARIABLE COMPENSATION AWARDS
SECTION 4.1. DESIGNATION OF VARIABLE COMPENSATION AWARDS. The Company's
management shall approve, or in case of Executive Officers recommend to the
Committee, the Performance Percentage and the corresponding Variable
Compensation Award to be paid to each Participant in accordance with the terms
of the Plan for the immediately preceding Plan Year. Within the first ninety
(90) days after the end of each Plan Year, the Committee shall review such
recommendations, make any adjustment it deems appropriate in accordance with the
terms of the Plan, and approve the grant and payment of the corresponding
Variable Compensation Awards in the aggregate and to the Executive Officers.
SECTION 4.2. ESTABLISHMENT OF PERFORMANCE PERCENTAGES. Management of the
Company shall assist and provide to the Committee management's recommendations
regarding the Performance Percentages applicable to each Company Performance
Level for each Award Group. No later than the ninetieth (90th) day of each Plan
Year, the Committee shall review such recommendations, make any adjustments it
deems appropriate in accordance with the terms of the Plan, and approve the
Performance Percentages for all Award Groups. In the event the Committee takes
no action prior to the ninetieth (90th) day of such Plan Year to change, amend
or rescind the Performance Percentages in effect for the immediately preceding
Plan Year, the Performance Percentages for such Plan Year shall be deemed to be
the Performance Percentages for the Award Group or similar Award Group in the
immediately preceding Plan Year.
SECTION 4.3. COMPANY PERFORMANCE LEVELS. Prior to the ninetieth (90th)
day of a Plan Year, the Company's management shall make recommendations to the
Board regarding the annual operating plan for the Company and each of the
Company's business units for such Plan Year (the "ANNUAL OPERATING PLAN"). The
Board shall approve the Annual Operating Plan with any modifications it deems
appropriate. Based on the approved Annual Operating Plan for such Plan Year,
the Committee shall establish the financial performance goals for the Company
and its applicable business units at the following three levels, which shall be
designed to help focus the Participants' attention on achieving superior annual
financial performance results in light of existing conditions: a threshold
level, which is the minimum financial performance income level for any award to
be made under the Plan (the "MINIMUM COMPANY PERFORMANCE LEVEL"), a target
financial performance income level (the "TARGET COMPANY PERFORMANCE LEVEL") and
a maximum financial performance level (the "MAXIMUM COMPANY PERFORMANCE LEVEL").
The Committee shall in its discretion establish the applicable objective Company
financial performance criteria for determining Company Performance Levels.
SECTION 4.4. DETERMINATION OF PERFORMANCE PERCENTAGES. Performance
Percentages for all Award Groups shall be based upon the Performance Percentage
assigned by the Committee for such Participant's Award Group with respect to
each achieved Company Performance Level for such Plan Year. In the event that
the Company Performance Level achieved is below the Minimum Company Performance
Level, the Variable Compensation Award for all Participants subject solely to
such Company Performance Level shall be 0%. The Performance Percentages with
respect to each Award Group for any Plan Year may be set or changed by the
Committee during the first ninety (90) days of such Plan Year.
SECTION 4.5. ADJUSTMENT OF COMPANY PERFORMANCE LEVELS. Except with
respect to Certain Executive Officers as provided in ARTICLE VI, if during any
Plan Year external or internal changes or other unanticipated business
conditions have materially affected the appropriateness of the Company
Performance Levels, the Committee may, in its sole discretion, determine
appropriate increases or decreases to the Company Performance Levels for such
Plan Year.
Participants shall not be entitled to any Variable Compensation Award under
the Plan unless the Company achieves at the corresponding Company Performance
Level. Except as provided in ARTICLE VI, however, the chief executive officer,
in the case of Participants other than Executive Officers, and the Committee, in
the case of Executive Officers other than Certain Executive Officers, may
approve payment of special awards to designated Participants.
SECTION 4.6. DETERMINATION OF COMPANY PERFORMANCE LEVEL ACHIEVED AND
PAYMENT OF VARIABLE COMPENSATION AWARDS. Within ninety (90) days after the end
of each Plan Year, the Company's management shall report to the Committee the
Company Performance Level achieved by the Company and each applicable business
unit for such Plan Year. The Committee shall review such report and certify in
writing or set forth in a resolution of the Committee the Company Performance
Level achieved by the Company and each applicable Company business unit for such
Plan Year. Such achieved Company Performance Level shall be used in determining
the corresponding Performance Percentage and Variable Compensation Award for
such Plan Year as provided in SECTIONS 4.1 and 4.4. The Committee shall approve
the grant and payment of the corresponding Variable Compensation Awards to
Participants pursuant to terms of the Plan. Payment of Variable Compensation
Awards shall be made following certification by the Committee of the Company
Performance Level achieved for such Plan Year and shall be paid in cash. Except
as provided in ARTICLE V, Participants must be employed by the Company on the
date the Committee certifies the Company Performance Level achieved for such
Plan Year to receive the approved award for such Plan Year.
SECTION 4.7. LIMITATION ON PAYMENTS. The amount payable to a Participant
pursuant to this Plan with respect to any Plan Year shall not exceed $3 million.
Without the written consent of the Committee, the Company shall not pay any
amount to a Participant pursuant to this Plan with respect to any Plan Year
unless the Company can fully deduct such amount pursuant to section 162(m) of
the Code.
ARTICLE V.
TERMINATION OF EMPLOYMENT
SECTION 5.1. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY,
RETIREMENT, OR TRANSFER TO AFFILIATE NOT INCLUDED IN PLAN. In the event a
Participant's employment with the Company is terminated by reason of death,
Total and Permanent Disability, Retirement or a Participant is transferred to an
affiliate that does not participate in the Plan, the Participant's Variable
Compensation Award shall be based on (i) the Participant's actual Base Salary
paid through the date of termination or transfer and (ii) the applicable
Performance Percentage. The Variable Compensation Award shall be paid in
accordance with ARTICLE IV.
SECTION 5.2. TERMINATION FOR ANY OTHER REASON. Except for terminations
listed in SECTION 5.1, in the event a Participant's employment is terminated for
any other reason including voluntary and involuntary termination prior to
certification by the Committee of the Company Performance Level achieved for
such Plan Year, the Participant shall not be entitled to a Variable Compensation
Award with respect to such Plan Year. However, the chief executive officer, in
his sole discretion, may approve the payment to such Participant of a Variable
Compensation Award under the Plan with respect to such Plan Year, except that in
the case of Executive Officers the chief executive officer may make such
recommendation to the Committee, which shall have sole discretion to approve
such award.
ARTICLE VI.
CERTAIN EXECUTIVE OFFICERS
SECTION 6.1. APPLICABILITY OF ARTICLE VI. The provisions of this
ARTICLE VI shall apply only to Certain Executive Officers. In the event of any
inconsistencies between this ARTICLE VI and the other Plan provisions, the
provisions of this ARTICLE VI shall control.
SECTION 6.2. PERFORMANCE LEVELS AND AWARD GROUP DETERMINATIONS. Prior to
ninety (90) days after the beginning of the Plan Year, the Committee shall
determine the Certain Executive Officers to be selected as Participants under
the Plan and the Award Groups in which each such Certain Executive Officer shall
be included.
SECTION 6.3. NO MID-YEAR CHANGE IN AWARD PERCENTAGES. Variable
Compensation Awards for Certain Executive Officers shall be based solely on the
Performance Percentage for the applicable Award Group as set by the Committee
during the first ninety (90) days of the Plan Year.
SECTION 6.4. NO ADJUSTMENTS OF PERFORMANCE GOALS. Once established,
Company Performance Levels shall not be changed after the first ninety (90) days
of the Plan Year with respect to Certain Executive Officers. Certain Executive
Officers shall not receive any Variable Compensation Award under this Plan when
the Company or the applicable Company business unit fails to achieve at least
the applicable Minimum Company Performance Level.
SECTION 6.5. DISCRETIONARY ADJUSTMENTS. The Committee retains the
discretion to eliminate or decrease the amount of the Variable Compensation
Award otherwise payable to a Certain Executive Officer.
SECTION 6.6. POSSIBLE MODIFICATION. If, on advice of the Company's tax
counsel, the Committee determines that Code section 162(m) and the regulations
thereunder (or similar successor section and regulations) will not adversely
affect the deductibility for federal income tax purposes of any amount paid to a
Certain Executive Officer under the Plan by disregarding one or more of the
limitations regarding Certain Executive Officers in this Plan, then the
Committee may, in its sole discretion, disregard such limitations.
SECTION 6.7. NO DISCRETIONARY AWARDS OR BONUSES. No discretionary awards
or bonuses shall be paid to Certain Executive Officers pursuant to this Plan.
However, nothing in this Plan shall be construed as limiting the right of the
Committee or the Board to make any other award or bonus under their general
authority or under any other plan.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
SECTION 7.1. NONTRANSFERABILITY. No right or interest of any Participant
in the Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law or otherwise, including execution, levy,
garnishment, attachment, pledge and bankruptcy.
SECTION 7.2. TAX WITHHOLDING. The Company shall have the right to deduct
from all awards or payments under this Plan, any foreign, federal, state or
local taxes required by law to be withheld with respect to such payments.
SECTION 7.3. AMENDMENTS. The Committee, in its sole discretion, without
notice, at any time and from time to time, may modify or amend, in whole or in
part, any or all of the provisions of this Plan, or suspend or terminate it
entirely.
SECTION 7.4. INDEMNIFICATION. Each person who is or shall have been a
member of the Committee or the Board or who is or shall have been an Employee of
the Company acting on behalf of the Committee shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or expense,
including without limitation, fees and expenses of legal counsel, that may have
been imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Company's
certificate of incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify him or hold him harmless.
SECTION 7.5. BENEFICIARY DESIGNATION. Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his death before he received any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during his lifetime. In the absence
of any such designation, or if the designated beneficiary is no longer living,
benefits shall be paid to the surviving member(s) of the following classes of
beneficiaries, with preference for classes in the order listed below:
(A) Participant's spouse (unless the parties were divorced or legally
separated by court decree);
(B) Participant's children (including children by adoption);
(C) Participant's parents (including parents by adoption); and
(D) Participant's executor or administrator.
If a class has more than one member, benefit payments shall be made in
equal shares among members of the class.
SECTION 7.6. RIGHTS OF PARTICIPANTS. Nothing in this Plan shall interfere
with or limit in any way the right of the Company to terminate or change a
Participant's employment at any time, nor confer upon any Participant, any right
to continue in the employ of the Company for any period of time or to continue
his present or any other rate of compensation. No Participant in a previous
Plan Year, or other employee at any time, shall have a right to be selected for
participation in a current or future Plan Year.
SECTION 7.7. GOVERNING LAW. The Plan shall be construed in accordance
with and governed by the laws of the state of Texas.
SECTION 7.8. EFFECTIVE DATE. The Plan shall be deemed effective as of
January 1, 1999.
EXECUTED to evidence this CompX International Inc. Variable Compensation
Plan adopted by the Board on February 17, 1999 to be effective as of January 1,
1999 and approved by the Company's stockholders on ______ __, ____.
COMPX INTERNATIONAL INC.
By:
A. Andrew R. Louis, Secretary